1982 (7) TMI 113 - AT - Income Tax

Summary

Issues:
- Whether unabsorbed depreciation of earlier years should be deducted before allowing relief under s. 80HH.
- Interpretation of provisions of s. 80HH and s. 32 of the IT Act regarding deduction of unabsorbed depreciation.

Analysis:
The assessee appealed against the order of the CIT(A) which held that unabsorbed depreciation from earlier years should be deducted from the income for the current year for the purpose of allowing relief under s. 80HH. The assessee argued that the brought forward depreciation should be deducted after granting relief under s. 80HH, which the ITO rejected. The Tribunal considered the provisions of s. 80HH and s. 32 of the IT Act. It was noted that s. 80HH allows a deduction from profits derived from an industrial undertaking, while s. 32 deals with carry forward and set off of depreciation. The Tribunal emphasized that total income should be determined before granting relief under s. 80HH, and unabsorbed depreciation of earlier years should be aggregated with the current year's depreciation before allowing relief under s. 80HH.

During the hearing, the assessee relied on the Supreme Court decision in Cloth Traders (P) Ltd. vs. Addl. CIT and the Calcutta High Court decision in CIT vs. Orient Paper Mills Ltd. The revenue cited the Supreme Court decisions in Cambay Electric Supply Industrial Co. Ltd. vs. CIT and CIT vs. Jaipuria China Clay Mines (P) Ltd. The Tribunal held that the decisions cited were not directly relevant to the issue at hand. It was clarified that unabsorbed depreciation of previous years should be aggregated with current year's depreciation before allowing relief under s. 80HH.

The Tribunal concluded that the unabsorbed depreciation of previous years should be aggregated with the current year's depreciation before determining relief under s. 80HH. The Tribunal upheld the order of the CIT(A) and dismissed the appeal filed by the assessee. The decision was based on the specific provisions for bringing forward earlier years' depreciation and aggregating it with the current year's depreciation before allowing relief under s. 80HH. The order of the CIT(A) upholding the ITO's decision was deemed appropriate and required no interference.